Should You Form an LLC for Each Rental Property?

When you invest in rental properties, forming a limited liability company (LLC) for each rental can simplify administration. Further, the benefits of forming an LLC for each rental property are numerous. You can reduce transfer tax, apply for multiple mortgages, and protect your other rental properties. 

With so many major advantages to forming an LLC for investing, many investors prefer to create multiple LLCs for rental properties. Should you get an LLC for each rental property? Read on to understand the pros and cons. 

Pros of Forming an LLC for Each Rental Property

There are numerous benefits of forming an LLC for each rental property, from liability protection to securing multiple mortgages. You can even transfer a rental property you already own to an LLC. Let’s find out more below:

Liability Protection

Forming an LLC for each property can provide significant liability protection as the asset is held in a limited liability company. This means that your assets are protected if there are issues with renters or other liabilities related to the house. 

For example, if someone is injured in the house and puts a personal injury lawsuit against the homeowner, the owner is the LLC. The lawsuit won’t touch your home, savings, and other assets. Likewise, a major incident at one property won’t affect the other properties if you own multiple rental properties. 

Avoid Transfer Tax

An LLC allows you to add or remove owners, called members, at any time. This means that if you have a single-member LLC that holds the rental property, you can transfer LLC ownership rather than property ownership. 

In the US, 38 states levy transfer taxes. Sometimes, these are called recordation tax, conveyance tax, or deed stamp tax. Local governments may also levy real estate transfer taxes. When you keep the home in an LLC, you can sell the LLC instead of the property and avoid transfer tax.

For example, if the rental property worth $310,000 is held in the LLC, when you sell it, you will sell the LLC and transfer membership within the LLC. In addition, if the home has a mortgage taken in the name of the LLC, the new seller can then assume the mortgage. Learn more about LLC tax benefits

Apply for Multiple Mortgages

If you apply for a loan under different LLCs, you can still be considered a first-time home buyer and qualify for favorable financing options like FHA or VA loans. Each LLC can apply for a mortgage independently. This not only simplifies administration but can lead to significant tax savings.

Things to Consider When Forming an LLC for Each Rental Property

Before forming an LLC for each rental property, you’ll want to consider the requirements to maintain the LLC in good standing and the possible financial implications. 

Filing and Renewal Fees

It can be expensive to form an LLC for each rental property, especially if you have more than 10 rental properties and if the state has high filing and renewal fees. Whether it makes sense for you depends on the potential rental income. 

For example, all LLCs must pay an annual $800 franchise tax in California. This can significantly reduce annual profit margins. On the other hand, it can be worth the cost and effort in states with low filing fees. 

High Mortgage Rates

When obtaining a loan through an LLC, mortgage rates are usually higher than for personal mortgages. How much higher depends on whether the LLC has a credit history and additional policies by the lender.  

Personal Guarantee for the Loan

Most banks will require a personal guarantee for the loan. In that case, if your LLC defaults on the payments, the bank can go after you and your personal assets to fulfill the judgment. 

In other cases, the bank may accept the property as collateral, protecting your assets. Consider available lenders’ options carefully before deciding whether to apply for a mortgage through an LLC. 

Alternative Solution: Cluster Your Properties in Different LLCs

As an alternative to making an LLC for each property, you could consider clustering properties by quantity, asset class, or location. Here are the structures you can consider while forming an LLC for rentals.


If you have more than 10 properties, you can group them into a few LLCs. This can reduce administrative costs and time while still securing the properties and gaining the other benefits of an LLC. 

Asset Class

If you plan to invest in real estate through different strategies, you can set up different LLCs for different classes. For example, you could set up an LLC for wholesaling properties for low-income houses, multi-family units, apartments, and high-income properties.


You could also consider grouping properties by the amount of equity you currently have in the property. Sometimes, investors will have individual LLCs for properties with high equity value and group rental properties with low equity into a single LLC


If you own properties in multiple states or regions, grouping them by location can be a practical solution. If, for example, you hold all rental properties you own in California in one LLC, and the properties you own in Oregon in another LLC, this can simplify administration. 

Support Your LLCs for Rental Properties with doola

As a busy investor, getting the best support for accurate bookkeeping can simplify property administration and ensure you can easily maintain multiple LLCs in good standing. If you need help with accounting for rental properties, consider doola’s bookkeeping services. 

doola Books is designed for busy professionals like you. Get doola bookkeeping services for best-in-class bookkeeping software so you can spend more time locating new rental properties or pursuing other investment opportunities. 


Is it necessary to form a separate LLC for each rental property I own?

No, forming a separate LLC for each rental property you own is not necessary. However, it can be a good idea in many cases. 

Can I manage multiple rental properties under one LLC?

Yes, you can manage multiple rental properties under one LLC. However, there are pros and cons to this, and you’ll lose the liability protection of the properties held in the same LLC, as the asset value of one could be seized to cover the liabilities of another. 

What are the ongoing obligations of maintaining an LLC for each rental property?

To maintain an LLC for rental properties, you must meet all state requirements, including annual reports and filing fees. You can check with your Secretary of State or the State Department of Corporations to confirm obligations to maintain an LLC in your state. 

Can I dissolve an LLC if I decide to sell my rental property?

Yes, you can dissolve an LLC if you sell your rental property. Alternatively, you could transfer the LLC to the new property owner and potentially save on transfer taxes. Learn how to dissolve an LLC in Texas or Ohio

Can an LLC have employees to manage rental properties?

Yes, an LLC can apply for an employer identification number (EIN) and hire employees. 

doola's website is for general information purposes only and doesn't provide official law or tax advice. For tax or legal advice we are happy to connect you to a professional in our network! Please see our terms and privacy policy. Thank you and please don't hesitate to reach out with any questions.

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